Excess HSA Contribution in 2023 and 1099 in 2024

[Steve Caamp]

In 2023 I had a single HDHP and contributed $3,850, my wife, however, was on a family HDHP and accidentally contributed $7,750. My wife contacted her HSA provider in early 2024 when we noticed the error and withdrew the excess contribution ($3,852 - $3,850 + $2 in earnings on the excess contributions).  I just noticed that on schedule 1 of our 2023 return Turbo Tax included $3,850 on line 8f as well as $3852 on line 8z for a total of $7,702 in additional income in 2023.  It appears to me that we paid taxes on this twice in 2023.  Is that correct?  If so, is there anything we can do to correct it?

Additionally, we received a 1099-SA in early 2025 for the excess contribution.  Box 1 has $3,852, Box 2 has $2, and Box 3 has distribution code 2.  It seems like if I report this on the 2024 tax return we will pay taxes on this amount for a third time.  Is that true?  How do I report this 1099-SA without paying taxes on the excess contribution again?

[BillM223 · Accepted solution]

First, let's do your last question. Enter your 1099-SA as is. When the distribution code is 2, then TurboTax knows that this is the return of excess contributions plus earnings. The amount in box 1 is ignored (check it, you'll see) because TurboTax knows that the excess was taxed last year (the year before you enter the 1099-SA). Only the earnings in box 2 will be added (again, check and you'll see that this is true).

OK, on your 2023 return, TurboTax undoubtedly told you that you had an excess contribution of $3,850. As soon as TurboTax knew this, it added the $3,850 to Other Income on your return, because your HSA contributions were through your employer and therefore removed from Wages in boxes 1, 3, and 5 on you (her?) W-2...so that amount had to be added back to income.

However, you report that the total was $7,702. $3,850 was excess contributions and $2 was earnings that you withdrew. I have to ask you - how did TurboTax know about the $2 in earnings? You told TurboTax, didn't you.

I suspect that you manually added the $3,852 to Other Income, not realizing that TurboTax had already added the $3,850 automatically. Is that correct?

If so, you will want to amend your 2023 return, to remove the $3,852. As you see, TurboTax already added the $3,850, and the earnings were not to be taxed until 2024.

Also, how much excess did you withdraw in early 2024? $3,852, right? In the HSA interview in early 2024 (for the 2023 return), when TurboTax told you that the excess was $3,850, did you agree to withdraw all of it? If so, then there was no carryover to 2024, so no 6% penalty. That simplifies things, but do tell me if that is not what happened.

OK, think about this, and see if you have any questions.

[Steve Caamp]

@BillM223 - this is very helpful!  All your assumptions were correct.  I have amended my 2023 return and confirmed that the 2024 return is only reporting the $2 earnings on the excess contribution.  Thank you again!